The binary option is a type of modern financial instrument. They allow you to earn a lot of money in a short amount of time. This type of option also offer very good returns to investors that can correctly predict market movements. Binary options regularly reward investors with returns of 60-500% on investment and by reinvesting your profits it is possible to quickly earn large amounts of money. Trading in binary options is however associated with high risk and you risk loosing your entire investment. It is therefore very important to be skilled at risk management to become a successful binary options trader. You can learn more about risk management and binary options by visiting binaryoptions.co.uk. A website that can help make you a better trader. Even the best trader can not predict the market correctly a 100% of the time and if you do not factor in losses in your investment strategy you risk loosing a lot of money trading with binary options.
Binary options can be a good source of revenue for traders that are willing to devote the time needed to successfully predict the market and that understand risk management.
What are Binary Options
Binary options are also known as put & call options, digital options and all or nothing options. All of these names elude to the nature of this financial instruments. They only allow for two different outcomes.
- The investor correctly predicts the direction the market will move during a period and earn a high return. Up to around 90%
- The investor incorrectly predicts the direction the market will move during a period and the binary option becomes worthless.
The investor does in other words risk the money he invested in the binary option. He can never loose more than the purchase price of the option. Many brokers make it possible to sell a binary option before it expires. This allows the investor to recuperate some of the investment in case the market don’t move as predicted.
Binary options can have different maturities and it is up to the investor to choose an option with a maturity that matches his predictions for the market. Binary options with a longer maturity are often to be consider less risky since it can be easier to predict a markets general trend than it is to predict how it will move in the short run. There are binary options available with a maturity ranging from a few weeks to a month down to as little as 15 seconds.
Each binary option is tied to an underlying financial instrument such as a stock or a currency pair. It is the movement of this underlying financial instrument that decides if the option ends in the money up on maturity or not. When you invest in a binary option you are predicting the development of the underlying stock, currency pair or commodity.
Binary options are high risk investments and should as such only be a small part of your overall investment strategy. Never invest money you can not afford to loose in binary options.
How to trade with Binary Options
It is very easy to trade with binary options. You can be up and running in just a few minutes. To trade with binary options you need to have an account with a broker. There are a lot of well established brokers that caters to the English speaking market. Different brokers offer different selections of binary options and it is therefore very important that you verify that the broker you register at offers a selection of binary options that is suitable to you. Many brokers, but not all, offer you a bonus when you first register and start trading with binary options.
Most brokers of binary options operating within the European union is incorporated on Cyprus and all trade at these brokers are regulated according to Cypriotic law. A broker that is licensed in Cyprus can offer their services in all EU countries without the need for any additional licensing in any of the individual countries they operate in. Cyprus has one of the most well developed legislation in the world when it comes to regulating the trade of binary options.
How to choose a broker
It can be hard to choose a broker. Most broker might initially seem to offer the exact same service but once you look a little deeper you will notice that different brokers offer different types and selections of binary options. Some brokers offer only small selections while other offer much larger selections. The best way to find a broker of binary option that suits your needs is to read broker reviews online. Some of the things you should think about when you decide which broker to use are:
- Does the broker offer a mobile trading platform. It is very convenient to be able to complete trades on the go.
- Do they offer a wide selection of binary options.
- Do they offer binary options based on the underlying financial instrument you want to trade with.
- What types of binary options do they offer.
- Do they offer good customer support.
- Are they known for promptly paying investor when they want to withdraw money from their account.
- Do they offer a bonus to new customers. Is that bonus worth accepting.
- Do they offer a VIP program with preferential treatment to active investors.
- Do they offer you a personal account manager
- What is the minimum deposit if you want to open an account.
Different types of Binary Options
Most brokers offer several different types of binary options that you can trade with. Different types of options offer different opportunities and different returns. Brokers are constantly trying to develop new types of binary options. Among the most common types of binary options you will find:
- Classic binary options aka Call/Put binary option: These are binary options where your goal as an investor is to correctly predict the direction in which the underlying financial instrument will move. They usually have a maturity of a few days to a few weeks.
- Turbo or super short binary options: These options are identical to regular classic binary options but with a lot shorter maturities. Turbo options can have maturities as low as 15 seconds.
- One Touch binary options: One touch options often offer the investor very high returns. 500-700% are common place. When you purchase a one touch option you are predicting that the price of the underlying instrument will hit a predetermined price at least once during the maturity of the option. This option can be very profitable if you expect a certain instrument to increase or decrease in value by a substantial amount in the near future.
- Boundary or In/Out binary option: This is a relatively new type of binary option. This type of binary option requires the investor to predict whether a financial instrument will trade inside or outside certain boundaries when the option matures.
- Option Builder Options: Some brokers offer option builders. This allows the investor to create his or her own binary options. Option builders give you an unprecedented freedom to trade on your predictions.